Pakistan may slash ISI's budget as default crisis deepens

On the verge of default, Pakistan is preparing to implement austerity measures to cut costs and arrest the slide in its fast-depleting forex reserves. The cash-strapped nation is mulling over cutting the salaries of government employees, reducing the size of federal ministers, and curbing the expenditure of ministries.

Pakistan Prime Minister Shehbaz Sharif has instructed the Ministry of Foreign Affairs to slash the number of foreign missions abroad and reduce their offices, staff, and other measures to cut down expenditures by 15 per cent, Pakistan's The News reported on Wednesday.

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According to the report, a directive issued by the PM Office asked the foreign office to submit "a well-considered proposal within two weeks positively". 

This official communication titled 'Rationalisation of Foreign Mission Abroad' stated that in view of the ongoing economic constraints and the consequent need for fiscal consolidation and control of external deficit, the prime minister was pleased to constitute a National Austerity Committee (NAC).

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Pakistan's forex reserves have fallen to a critically low level of about $3 billion, sufficient for only 16-17 days of imports.  

The austerity committee has recommended that the expenditure on Pakistan Missions abroad may be reduced by 15 per cent. This may be achieved, the committee said, by curtailing the number of Foreign Missions, reduction in the number of officers and staff posted there, and other suitable measures.

Acting on the recommendation, the Prime Minister has asked the foreign office to submit a plan to cut down expenditures.  

However, Climate Change Minister Sherry Rehman said that the government needs to carry out structural and fundamental economic reforms rather than 'optic' measures. "Many of us will voluntarily surrender salaries in the interest of further austerity but it’s the size of the cabinet too that must go down,” she said.

Earlier this month, the Cabinet size swelled to 85 with seven more special assistants. Of the 85 Cabinet members, 34 are federal ministers, seven ministers of state, four advisers to the prime minister, and 40 special assistants to the prime minister.

Once implemented, the austerity measures will limit perks and privileges granted to government officials including pensions of retired judges. About half of PM Shehbaz Sharif's Cabinet members are expected to work without any salary while the rest will take a 15 per cent cut in salaries.

Pakistan may also cap discretionary grants, and secret service funds of the Inter-Services Intelligence (ISI) and Intelligence Bureau (IB). Besides these, austerity measures could include cuts in the budget of all government entities and withdrawal of certain perks and privileges of Cabinet members, parliamentarians, and government servants, including luxury vehicles and security/ protocol.

The PM's direction comes just a week after Pakistan Finance Minister Finance Ishaq Dar proposed a tax hike on a host of goods and services to raise Rs 170 billion in additional revenue as mandated by the International Monetary Fund (IMF). The IMF wants Islamabad to cut power and fuel subsidies and raise revenue to secure the latest tranche of the bailout package.    

In December 2014, Pakistan put one of its diplomatic properties in the US capital — a building on the prestigious R Street NW — for sale. The building housed the embassy’s defence section from the mid-1950s to the early 2000s, according to Dawn.

Meanwhile, Finance Minister Dar on Wednesday announced that the board of the China Development Bank (CDB) has approved a loan facility of $700 million for Pakistan. In a tweet, he said the formalities had been completed for $700 million from the CDB, and "this amount is expected to be received this week by State Bank of Pakistan which will shore up its forex reserves!".